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tv   Options Action  CNBC  August 8, 2014 5:30pm-6:01pm EDT

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♪ this is "options action." tonight -- from russia with love. investors around the world are freaking out about russia, but could the russian stock market be your best bet? and we'll tell you how to protect yourself. and what does new york's most famous deli have to do with
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"options action"? we'll tell you. "options action" starts right now. >> mandy drurry standing in for melissa lee. a key test next week, one key group we still have to hear earnings from, the retailers. macy's, kohl's, jcpenney. let's get in the money. by the way, i never doubt the power of the u.s. consumer. >> well, maybe i'm a little bit more of a skeptic. that was a pretty mixed bag of retailers reporting next week. walmart, macy's, nordstrom, they're not the same thing.
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we did have the minor uptick in the unemployment sector, and mcdonald's, not so good. but the american consumer seems pretty tapped out right now. unless something comes along to put cash in their pockets, i don't see how they can fuel a rally. >> when you say tapped out, do you mean across the board? >> i'm saying the working middle class, the people shopping at target and kohl's. >> well, the ten-year interest trade, below 2.5%. that's money in their pocket. grain, oil, gas prices, that's cheaper for the consumer. so, some positive effects that
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could charge the economy. >> well, low rates don't help people charging their purchases. >> assuming there's no bigger geopolitical issue here, that's the bigger fact here. consumer data matters. the report of target, that gives you insight into the consumers. the better the economy is doing, but not too great, the better it is for the market. >> well, do you they they really care, the average american consumer, about geopoliticly? >> well, what's going on in ukraine and iraq, doesn't affect them going to walmart.
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well, if people get panicky, they left everything off the shelf. >> how about alcohol and cigarette stocks going up, maybe, with the headlines? well, what about walmart? >> this is not a stock that performs particularly well after earnings. a lot of secular headwinds. sam's club, growing almost the same rate as costco. but the real story, despite all of these things, the market still doesn't like this stock. so, i'm going to take a quick look at the august puts, not the ones that expire next week, but
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the week after. you can spend $1 for those. if it moves just a couple percent to the downside, they could be good. >> and i think we're going to butt heads on the show today, you seem a little bit negative on the consumer, i'm a little bit positive. but that chart does look a little ugly. looking at the daily chart of walmart, testing the support line. it bumps up against resistance. and buying a cheap put like that gets you in play. >> and you're buying something for fair value. the implied move, around 2%. that's typically what you see. i think it's a fair value trade. >> and probably everyone
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watching, long stocks and trades like this, you can do that. >> let's move on, because the russian stock market, having its best day since june. what are you hearing? >> well, stocks here, they may have gotten a decent move to the upside, taking off after russia announced an end to military exercises near the ukraine border. and the exchange trading fund, rose 2.5% today, igniting a ton of activity. trading three times their average daily volume. much of that, call buying centered around the august 9th expiration in the short-term. keep in mind, it's down almost
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20% on the year. so, it may be too soon to call it a comeback. >> well, how would you play the russian market? >> well, this is an interesting situation. the rsx has had a couple of interesting situations here. in march, with the crimean crisis. and then with the tragic airline crash. a little bit of a rally here, the volatility has increased. you would expect that, because the rsx is moving more. and from the low 20s to high 20s. on the higher side of what we've seen over the last two years. below the average of the last five years. so, if you're interested in getting long russia, potentially could be a rebound here,
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consider options. so many different moving parts in russia. i'm much more comfortable owning options. i was looking specifically out to the september 25 strike calls. today, trading around $23.75. the break even is 73 cents. >> well, i want to point something out. the russian stocks trading at six times earnings three years ago. we're around the same place right now. one of the things you have to look at, i like making a bullish bet here, because this is one of the situations where you actually do have really cheap stocks. everybody is panicked. getting an option can reduce
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risk. >> basically, you can, if you do see a pop, russia pulling away from the borders, things get better. you look to sell the call out later. you don't have to ride it out to expiration. just buy the call, look to take a profit off of it. >> and this is one of the situations where the stocks there are so cheap. a lot of people looking to russia, where stocks are cheap. >> and to mike's point, i didn't find many spreads that are attractive. so, if you do get the pop, that should increase that option there. and brian's point, you don't
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have to hold it through september. >> and that's the bottom line. >> okay, if you have a question, you can tweet it to us. and if everything "options action," you can check out our website at cnbc.com. here's what's coming up next. >> why are options traders flocking to new york's most famous deli? there's money to be made. and look at the vix. we'll tell you how to profit when "options action" returns. . ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up.
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the fear is apparently still here. even as stocks closed high, the vix remains hot. brian, at the screen, show us what exactly we're looking at here. >> well, the vix is my baby. and i track it often. let's look at where it came from and where it's at. when you look at the vix here, the 16 level. it's magical because when the market drops below 16 in the vix, you get this feel-good. this whole area, good feeling. the rally in the s&p can continue. and this one, one of the longest
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streaks in history staying below 16. only in 1996 was there a bigger, longer time. and this area, the bad area. people are always talking about the vix is broken. doesn't mean anything. well, when we drop below 12, when it does that, within six months, a significant pop. the streak has broken. the consecutive hit streak, pops below 16, and some volatility in the market. and that it's tough in july and august. >> and an incredibly low historical base. so, are we overreaching a bit saying oh, we've got fear back in the system? but we're still at relatively low levels. >> right. and after the market makes a 2%
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move in july or august, we see it happen again, two, three, or five times. and we talked about the 12 level in the vix. hitting it here, a tremendous run in the market. but that was a lot of complacency. and this 8 -- 1880 level, we broke that area. so, a little bit of a flush out in the market. finally, that selloff that was called for. and the market popping back. but i still think there's a lot of overhang in the s&p. and this 1940 level, you have to worry that we got a little overextended in the rally. >> what do you think, mike? >> well, i think it's important for people to remember, the
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month that people often get scared about is october, but september is typically a very volatile month. so, there's a lot of things that could potentially go wrong. we still have major concerned not discussed this week with italy and spain. and some more consumer related ear earnings results that could pressure the market. >> and the vix, the fact that it didn't drop significantly, i wouldn't read into it. you can't trade over the weekend, so it's not embedded volatility. and it can go either way. a 1% move every three days.
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we're seeing those moves. so, volatility at 16, it says the market can move. that does mean up sometimes. >> and what could take us higher or lower next week? >> well, the catalyst is, the technicals, a little flush-out, and the s&p could trade up to 1940. and some of the names we talked about in the first segment, how they produce. walmart, priceline. if that seems to be faltering, i think we can get the other selloff, and hit two or three more times, a serious selloff over 1%. >> and we could see money flowing out of the equity prices. if people see big names they're
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concerned about, they may say, i'm going to reduce my exposure. >> i still think this is an interesting situation. the sentiment is definitely still bullish. coming up, why did "options action" take a trip to katz's deli? the answer may surprise you, and make you money. we'll be right back. time and sales data. split-second stats. ♪ its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade.
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[b♪ll rings]
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time and sales data. split-second stats. ♪ its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade.
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♪ when the world moves, futures move first. learn futures from experienced pros with dedicated chats and daily live webinars.
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and trade with paper money to test-drive the market. all on thinkorswim from td ameritrade. it's friday, almost 6:00 p.m. eastern. time for the final call. the last words from the options pits. >> well, listen. a lot of volatility i think still to come. i'd be buying options or protection on any rally on the stock market. >> stacey? >> so, we didn't get the sandwiches now, and i'll buy three of them, take the money, and take the rsx strike calls. >> and i like -- i certainly like the idea of buying calls,
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things cheap and beaten up. rsx qualifies, and for 15, bank of america, too. >> looks like our time is up. go to our website and check out our daily segment every day on "fast money."
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